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John Tizard: Look out for charities looking out for our communities

Monday November 30th, 2020

Many local authorities and health trusts have contracts and funding agreements with charities, including local voluntary and community groups. Sadly, however, even in the best of times, there are too many examples of these arrangements being one- sided and heavily biased in favour of the public sector.

As to why this should be the case, most commonly, there seems to be an expectation (sometimes, even a requirement) that charitable bodies will readily subsidise the public sector when delivering services on its behalf – whether through contracts or other funding arrangements. And bizarrely, too often charities agree (or are bamboozled, having failed to undertake sufficient due diligence) into taking on such service provision for fees that fail to ensure cost recovery, let alone make even a small marginal contribution to building reserves and resilience. By comparison, whilst there are a few ‘businesses’ that have acted in this way, the vast majority do not. Instead, they quite sensibly contract with the public sector on terms that protect their commercial interests, contribute to profits and ensure their long-term viability.

Ironically, the COVID-19 pandemic has brought the hazard of such arrangements with charities from out of the shadows. Charities across the country (whether large or small, national, or local) now find themselves facing severe financial challenges as a result of the pandemic and consequent economic crisis. Sources of charitable fund raising are reducing and, in some cases, have dried up completely.  Many historic donors have less cash available and are re-assessing their spending and donation plans. Charity shops have been forced to close throughout the lockdowns, and most have seen inevitable falls in footfall and cash takings when they could open. At the same time, other forms of fundraising have been adversely affected by the pandemic restrictions, and investment income (for those charities fortunate enough to still have invested reserves or endowments) has fallen.  

Charities and local community organisations have also faced additional demands for their services because of the pandemic. This is particularly the case for those providing food bank and other services in response to rising poverty and those providing community support.  Additionally, merely to continue to operate, these organisations have faced additional costs in order to be COVID-19 compliant, and to protect staff, volunteers, and clients. 

Bluntly, if a charity is providing contracted services to a local authority, health or other public bodies for less than full cost recovery, this will be financially harder (and likely impossible) to sustain over the next months and years.  Full cost recovery plus a margin should be the norm and the pandemic has proved this. Charities should step back from contracting to run public services.

In light of all the above, executives and trustees now find themselves under immense pressure to find ways of maintaining both direct services and advocacy (and note that the latter must not be forfeited in favour of the former as this undermines the core role of charities and their ability to promote the interests of their communities – and the very future of their organisations). This is deeply consuming of time, energy, and commitment. The opportunity costs are be massive.

For all these reasons, it is vital that all public sector bodies should recognise the problems and challenges that I have outlined above.

I know that many are – but I know that there are far too many instances where this is not the case. Indeed, there is ample anecdotal evidence that some public bodies (faced with severe demand and financial pressures) are assuming and expecting charities will, without complaint, provide more for smaller payments. This is simply wrong; it is short sighted; and it is not in the public interest.

If charities and community groups are significantly to cut back provision or are forced to close because they become insolvent, the losers are the people and communities that they support and work with. And, as night follows day, their absence will and must inevitably lead to additional pressures on the public sector.

Charities including voluntary and community groups have critical roles to play in contributing to short-term responses to the COVID-19 crisis, but they have an even greater role in national, regional and local recovery and reform programmes. They have to be there, at the table – or on the Zoom call – in order to do this, and so they must be enabled to survive this short-term crisis if they are to play their proper part and fulfil this longer-term contribution. 

Accordingly, there is an urgent need for the Government to act and to support charities rather more generously and effectively than it has to date during the COVID-19 pandemic. It could, for example, introduce a ‘charity investment fund’, financed from taxation. Such a fund could be used to support investment in staff development, designing and implementing new business and operating models – and in some cases, to facilitate mergers, and grants to cover transition costs.

There is a strong case for this funding to be devolved to local authorities, combined authorities, and elected mayors, to allocate in partnership with charities and community groups.

That said, local authorities and other bodies currently contracting with or funding charities and community groups should not wait for government action. They should already be considering local schemes similar to the one I have proposed above for central government (although it is only fair to recognise local government’s own financial position of severe underfunding and more cuts to come).

At a minimum and frankly ‘now’, these public bodies should be having honest conversations with the charities and community groups they are supporting, to better understand their financial health and to explore how they could be financially supportive during the COVID-19 crisis. This should include charities and community groups not previously in receipt of public funds.

Local authorities and NHS trusts often speak warmly of their ‘partnerships’ with charities and the voluntary and community sector, but, sadly, the rhetoric too often fails to live up to reality. This needs to change – true partners will always wish to ensure the viability of their fellow partners. 

In summary, there is an overwhelming public interest for an approach such as I have outlined above. So, my message to all public bodies (and especially local authorities) is to please look out for those organisations that have looked out for you for many years, and who continue to look out for local communities every day.

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